It was an up-and-down year in 2003 for many firms on ENR's Top 400 Contractors list. Soft markets in many sectors, combined with big opportunities, kept firms on their toes. But overall, a sluggish domestic construction market has many contractors looking at how they manage their business.

The ENR Top 400 Contractors generated a total of $193.35 billion in 2003, down 0.5% from $194.39 billion in 2002. On the domestic side, revenue fell sharply. The Top 400 showed a 4.7% decline from $179.79 billion in 2002 to $166.53 billion last year. International work saved many of the Top 400 companies, with combined revenue of $26.82 billion for the group, up a dramatic 40% from 2002's $19.60-billion mark.

Revenue changes from 2002 to 2003 varied widely among individual firms on the Top 400. Firms in stagnant markets, such as power, saw their numbers drop from previous boom years. "The power market, particularly in gas plants, is way down," says Keith Manning, senior vice president of business development for Zachry Construction Corp. "However, 2004 looks like it's going to be a good year for new bookings and proposals," he says.

One major change in the power market is the surge of interest in coal-fired plants. "The problem for that market is that there is a long front-end on them with design and permitting," Manning says. However, he believes that there will be major new coal plant projects awarded in late 2004 and early 2005.

Foster Wheeler Corp. is still suffering from power market doldrums and other corporate issues, but company Chairman, President and CEO Raymond J. Milchovich says he sees some signs of hope for the financially struggling company. The firm now is in the "quiet period" of a recapitalization plan that he says will reduce debt by $500 million and cut interest charges by $30 million a year when it is completed by mid-June. "This complete debt-for-equity exchange is our top priority," he says. "It will significantly improve our financial position."

Foster Wheeler had lower overall revenue for the quarter, but it slowed its losses, from $19.8 million for last year's first quarter to $4.3 million this year. The firm took a $24.6-million charge related to one problematic power project in Europe that the firm declines to identify.

Milchovich says Foster Wheeler's engineering and construction work continues to pick up. "The businesses have experienced year-over-year increases," he says. Overall, the firm's "domestic liquidity strengthened in this quarter and will continue to strengthen. We have positive cash flow," he says.

Marnell Corrao is on the other side of the market swing. The Las Vegas-based casino builder has had a roller-coaster ride over the past few years. "In 2001, we were in the process of looking at moving across the U.S.," says CEO Tony Marnell. "Then 9/11 happened" and the hotel, resort and casino market dried up. "We spent the next 18 months retooling, hiring some top people and refocusing on our core markets in Nevada." As a result, contracting revenue for the firm fell dramatically in 2001 and 2002.

But Marnell Corrao bounced back in 2003, more than tripling its revenue over 2002, the largest gain by far of all the Top 400. Part of the reason is that the firm now is working on Steve Wynn Resorts' new $2.5-billion hotel, casino and golf course. "But when you get one huge casino project like this, the other customers tend to follow with additional projects," says Marnell. The firm also is working on a major new showroom at the MGM Grand Hotel & Casino. "We're also seeing major renovation work at a number of other casinos," Marnell says.

One of the biggest revenue increases among the Top 400 was posted by Bechtel, the No. 1 firm on the list. Its contracting revenue in 2003 was up over 36% and the firm's new bookings climbed even faster. "This comes from our long-term strategy of diversification and our focus," says Jude Laspa, deputy chief operating officer and executive vice president. He says Bechtel has tried to anticipate long-term client and market needs when getting into new markets, but also focuses on how best to provide value-added services to maintain market share.

Laspa uses the telecommunications market as an example. "We weren't in the telecom market 10 years ago. But we saw that, while individual cell sites were not complicated, the ability to site and install 4,000 towers at a time in a short time was a huge undertaking," Laspa says. "That played to our strengths in management and logistics." Bechtel now is the biggest telecom contractor in the world, he claims.

The fact that Bechtel is so big and growing fast does not mean it is grabbing everything in sight. "This is a low margin business, so we have to take a look at what's at risk on each job," Laspa says. He is concerned about other firms in the industry that are ignoring risks. "We are seeing some of our competitors who are hungry and taking risks we wouldn't." Laspa says that the industry's reputation is damaged when major players get into trouble or go out of business. "It sends a message to the banks that this business is a higher risk than it really is."

A number of major contractors have undergone financial changes in the past year, such as McCarthy Builders. For the first time since it was founded 140 years ago, there is no McCarthy family member as an owner. "We completed the purchase of the last of the McCarthy family stock and are now 100% employee owned," says Michael Hurst, president. The firm now is 30% owned by about 70 managers and 70% by an employee stock ownership plan. "Every salaried employee now has an ownership stake. We essentially have about 780 owners," he says.

But that's not the only change McCarthy is planning for. It is beginning to consider expanding east of the Mississippi River. "Our first move will probably be in the Southeast, but it's very early in the planning stages," says Hurst. "We haven't even decided yet whether to move into a market or acquire a firm."

Other contractors are looking to expand geographically. "We have 12 regional offices that are aligned with our real estate offices, acting as regional contractors from each office," says Steven Kennedy, executive vice president of Duke Realty and head of the firm's construction arm, Duke Construction. "We are beginning to pursue work on a national scale."

One firm undergoing a major change and increasing its size rapidly is CB&I. "We changed our name from Chicago Bridge & Iron because we figured we were no longer in Chicago, we aren't in the bridge market and we don't work with iron," says Gerald Glenn, chairman and CEO. The firm has acquired several companies over the past few years, including Pitt-Des Moines for added capacity in tanks and pressure vessels, Howe-Baker for its refinery capabilities, and John Brown Hydrocarbons...